Telus subscriber adds offset slight ARPU pressure

Despite the summer’s volatility in the wireless market, with a rush of new offerings in “unlimited” plans and new phone financing schemes that threatened to put a damper on telecom wireless returns, Telus Corp. has managed to remain resilient. That’s the initial take from analysts as Telus released results today from the three months ending Sept. 30, which saw better-than-expected subscriber additions making up for the loss of overage fees due to the new plans. Overall revenues came in at $3.7 billion for the quarter, a two per cent decrease from the $3.77 billion reported in the same period last year. Net income for the company came in at $440 million, a 1.6 per cent decrease from the $447 million in profit the company pulled in last year. The company added 111,000 mobile phone subscribers in the third quarter of this year, down 8.3 per cent or 10,000 from how many it added in the same period last year, but slightly higher than analysts predicted. It ended the quarter with 8.66 million wireless subscribers. The smaller number in wireless subscriber adds in the quarter “reflects heightened competitive intensity during the seasonal promotional period,” Telus wrote in its quarterly release. Average revenue per user was down 1.1 per cent in the quarter, to $61.64 from $62.34 in the same quarter last year. “While we’ve indicated that there could be some initial ARPU pressure coming from endless data plans, as high value data customers step down, we saw a continued positive trajectory on moderating ARPU declines,” Telus CEO Darren Entwhistle said on the Thursday morning call with analysts. “This has been achieved against a backdrop of robust data growth and increasing inclusive buckets across the industry, which we’ve been navigating well in recent years.” Entwhistle added that “data overage has now become a very small part of our overall revenue. And longer term, we anticipate significant ARPU step ups and network service revenue expansion as customers move to larger data plans.” Responding to questions from analysts about the new unlimited plans, chief financial officer Doug French said that overage fees had resulted in customer anger over the years. “The number one dissatisfier for customers with data plan breaching was overage. The hidden costs associated with that number one client dissatisfier on the breaching of the data plans and not having that security, and that peace of mind, was extremely significant for this organization,” he told analysts. Last month, Rogers Communications Inc. revealed that one million customers had switched over to the new unlimited data plans, three times the amount the company had predicted. The migration to the unlimited plans caused a 2.1 per cent dip in ARPU to $56.01 from $57.21 in the previous quarter. The results from Rogers triggered something of a stock sell-off, which provoked Desjardins analyst Maher Yaghi to write in an Oct. 2 note that “investors are nervous and questioning if the telecom space is fundamentally broken.” The plans had caused a stir in the market place over the summer, as the telecom companies all lowered prices to compete with one another. In a Thursday afternoon note from Canaccord Genuity analyst Aravinda Galapatthige, he wrote that Thursday’s results from Telus show a level of stability. “A key takeaway from the Q3 results and comments on the conference call was that is managing its own migrations to unlimited data plans quite well. This is significant given there is still some degree of uncertainty around the near-term wireless financial outlook, particularly for the incumbents,” he wrote. Telus also reported what analysts are calling strong gains in Internet and television, with 32,000 and 19,000 additions respectively. While Internet additions were down 11.1 per cent from the 36,000 they added in the same quarter last year, the additions this year beat analyst expectations, while new television subs were actually up 5.6 per cent from the 18,000 additions in the same quarter last year. It ended the quarter with 1.95 million internet subscribers and 1.15 million TV customers. Telus said the Internet numbers were a result of “continued net new demand from consumers and businesses, partly due to the launch of unlimited home Internet data, was offset by heightened competitive intensity.” The television additions were likewise a result “of our diverse product offerings, partly offset by competitive intensity, and by a lower customer churn rate resulting from stronger retention efforts for the nine-month period.” — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Telus subscriber adds offset slight ARPU pressure

News | November 7, 2019

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